Novartis enters option to acquire rights to emricasan from Conatus Pharma for treatment of NASH cirrhosis and HCV fibrosis.

Conatus Pharmaceuticals Inc. announced it has entered into an exclusive option, collaboration and license agreement for the global development and commercialization of its first-in-class, orally active pan-caspase inhibitor emricasan with Novartis. Under the terms of the agreement with Novartis, Conatus will receive $50 million upfront, and is eligible to receive $7 million following the exercise of the license option. Conatus can borrow up to $15 million in the form of convertible promissory notes under an investment agreement with Novartis. Conatus is eligible to receive significant payments if certain development, regulatory and commercial milestones are met. Furthermore, Conatus is eligible to receive tiered double digit royalties on emricasan single agent sales and tiered single to double digit royalties on sales of combination products containing emricasan. Conatus has the option to co-commercialize emricasan in the United States, including combination therapies, on a cost-sharing and revenue-sharing basis in lieu of U.S. royalties and with reduced ex-U.S. royalties. Conatus retains limited rights to develop other pan-caspase inhibitors In addition, Novartis will pay 50% of Conatus' Phase IIb emricasan development costs after the option exercise, including the planned ENCORE-LF trial in decompensated NASH cirrhosis which, under the current development plan consistent with recent regulatory agency recommendations, will be conducted as Phase IIb rather than Phase IIb/III. Phase IIb emricasan development costs also encompass the ongoing ENCORE-PH trial in primarily compensated NASH cirrhosis, POLT-HCV-SVR trial in post-transplant HCV fibrosis and cirrhosis, and ENCORE-NF trial in NASH fibrosis. Novartis will assume full responsibility for emricasan's Phase II development and all combination product development.

The company is evaluating emricasan's potential effects on clinically relevant consequences of NASH cirrhosis in its ongoing Phase IIb ENCORE-PH (for Portal Hypertension) clinical trial with an HVPG portal hypertension surrogate endpoint, initiated in November 2016, in patients with compensated or early decompensated liver cirrhosis caused by NASH, and with severe portal hypertension. The company is evaluating emricasan's potential longer-term effects on liver structure in its ongoing Phase IIb ENCORE-NF (for NASH Fibrosis) clinical trial with a histology-based endpoint, initiated in January 2016, in patients with NASH fibrosis and its ongoing Phase IIb POLT-HCV-SVR clinical trial with a histology-based endpoint, initiated in May 2014, in post-orthotopic liver transplant (POLT) recipients who have reestablished liver fibrosis or cirrhosis post-transplant as a result of recurrent hepatitis C virus (HCV) infection and who have successfully achieved a sustained viral response (SVR) following antiviral therapy. The planned Phase IIb ENCORE-LF (for Liver Function) clinical trial with a composite clinical endpoint, expected to begin in the first half of 2017, will evaluate the effects of emricasan on liver function and collect chronic administration safety information in decompensated NASH cirrhosis patients. Conatus expects top-line results from its ongoing and planned clinical trials to be available periodically beginning in the first half of 2018.